Paid Leave Benefits Amid Coronavirus Crisis

If you work for the government, or for a company with fewer than 500 employees:

Most workers at small and midsize companies can get the paid leave, as can government employees, as long as they’ve been employed at least 30 days.

You will be eligible for two weeks of sick leave at your regular pay rate to either quarantine, or to seek a COVID-19 diagnosis or preventive care for yourself.

You will also be eligible for two weeks of paid sick leave at no less than two-thirds your regular pay rate if you are caring for a family member with a COVID-19 diagnosis, or to care for a child whose school or daycare has closed as a result of coronavirus concerns.

Full-time employees will be entitled to 80 hours worth of paid sick time. Part-time employees will be entitled to the number of hours they normally work in a two-week period.

Additionally, an expanded Family and Medical Leave Act will provide government employees and those who have worked for companies with fewer than 500 employees for at least 30 days with 10 weeks of emergency paid leave to care for children whose schools or daycare facilities were closed.

Quarantined workers, or those who were caring for afflicted family members, will not be eligible.

Healthcare providers and other first responders can also be excluded.

After 10 days of unpaid leave, your employer will pay you no less than two-thirds of your usual pay—up to $200 per day, and $10,000 in total.

Who is excluded?

The legislation stipulates that the Department of Labor can exempt businesses with fewer than 50 employees from providing workers with paid emergency leave “when the imposition of such requirements would jeopardize the viability of the business.” About 12 million private sector employees work for companies with fewer than 50 employees.

Companies with less than 50 employers who wish to apply for an exemption to the paid leave mandate because they think it would “jeopardize the viability” of their business can reach out to the Department of Labor.

Companies with more than 500 employees are also excluded from the paid leave mandate.

What does it mean for my business?

Companies with less than 500 employees will have to front the costs of paid sick and emergency leave, but will later be eligible for reimbursement tax credits from the government.

For paid sick leave wages provided to employees who must quarantine because they are sick with COVID-19 or are trying to obtain a diagnosis, companies will be reimbursed up to $511 per employee per day. For paid sick leave wages provided to employees caring for loved ones, employers will be reimbursed up to $200 per worker per day. Self-employed individuals are also eligible for the reimbursable tax credits.

The reimbursement paid via payroll tax credit will also cover the employer’s contribution to health insurance premiums during the leave.

It’s fully refundable, which means that if the amount the employers pay workers who take leave is larger than what they owe in payroll tax, the government will send them a check for the remainder.

Self Employed Individuals

People who are self-employed but work for another employer — e.g. Lyft and Uber drivers, caterers or planners for major events like South by Southwest — are eligible for a tax credit of up to two weeks of sick pay at their average pay and 12 weeks of family leave pay at two-thirds their normal rate.

These workers must show they had to comply with a self-isolation recommendation or that they had to care for a child whose school closed due to the coronavirus. Their benefit is capped at $511 per day for paid sick leave and $200 for family leave (or the average daily income the person usually receives if it is less than those amounts).

The tax credit can be applied against a person’s income taxes, and it is refundable, meaning taxpayers will get a government rebate if their sick or family leave pay was greater than their tax bill.

What happens after coronavirus?

Though the original version of the Families First Coronavirus Response Act included a permanent paid sick leave benefit that would have enabled workers to accrue seven days worth of paid sick leave, the sick leave benefits included in bill that passed the House and Senate will only last through December 31, 2020.

When does it take effect?

President Donald Trump signed the bill into law on March 18th, 2020, and the paid leave provisions are supposed to take effect within 15 days.

Issues with Bill

Concern about how quickly the money will flow: One of the biggest issues with these new benefits is they are largely being paid for by tax credits. That means small businesses and gig workers will have to apply to the IRS to get a tax credit — or a tax refund if a person’s tax bill is not as large as the cost of their paid sick and family leave.

Small-business groups have already voiced concerns over the fact that restaurants and travel and hospitality companies have seen sales plummet. They do not have the cash on hand to start paying these benefits.

BiggsKofford, CPA is continuing to monitor the ever changing financial landscape and government measures. We know that the situation is evolving quickly and we will be here to support you in this time of uncertainty. We will provide ongoing updates and guidance as more information becomes available.